US legislators accuse China of ‘weaponising’ graphite exports

Some building blocks for domestic graphite supply chain are in place, but more support could be forthcoming

US legislators accuse China of ‘weaponising’ graphite exports
Graphite has become the focus of a geopolitical storm

Lawmakers from the US House Select Committee on the CCP have accused China of stoking a trade war, after the Chinese administration last week announced it will restrict the export of certain product types of graphite, a key battery anode material.

“The CCP’s weaponisation of trade over supply chain ‘chokepoints’ illustrates the urgency to pass legislation that counters economic coercion and creates new tools to respond to the actions of the CCP,” says a joint statement from the committee’s Representatives Mike Gallagher and Raja Krishnamoorthi.

And the politicians are now throwing their weight behind mining and mineral firms’ efforts for a more self-sufficient North American graphite value chain. “The Chinese Communist Party’s latest decision to restrict exports of graphite, a key electric vehicle battery material, underscores the need to quickly diversify our supply chains away from the People's Republic of China and shore up collective resilience with our partners and allies,” the committee’s statement continues.

The North American EV industry will need to replace up to 33pc of its graphite imports once Chinese restrictions come into force in December, according to thinktank the Centre for Strategic and International Studies (CSIS). China produces c.65pc of the world’s natural graphite, as well as over 90pc of graphite anodes, which Simon Moores, CEO of information firm Benchmark Mineral Intelligence calls “a rare and complete supply chain dominance for the suite of battery and EV raw materials”.

“Anode material is an important component material which make up lithium-ion batteries, of which carbon-based synthetic graphite anode material and natural graphite anode material are the main commercialised products,” explains Brendan Jephcott, of Hong Kong battery minerals consultancy Goden Dragon Capital.

Stepping in

A handful of North American firms have thrown their hat into the ring as contenders to boost domestic graphite market share. But it will not be a quick answer.

“In order to stay ahead, large automotive industry players have been investing in mining projects to ensure a steadier supply of battery inputs. However, getting these mines ready for operations takes between five to 10 years, and these projects are still largely in preproduction,” says CSIS.

In addition to progress on upstream mining, there has been investment and regulatory approval of processing facilities, such a joint venture (JV) project in Warren, Michigan. But this project could well be a bellwether of changing US political and regulatory attitudes.

One of the JV partners is a firm called Emerald Energy Solutions, described last year as "comprised of local Michigan professionals experienced in handling all aspects of the development of state-of-the-art industrial and manufacturing facilities in the Detroit metropolitan area", and which owns and operates the 27-acre industrial Emerald Business Park. It will be responsible for acquisition, designs, permitting and regulatory approvals, construction, inspections, mechanical operation of the facility, as well as administrative corporate support for the JV.

But the technical knowhow is provided by Graphex, a Hong Kong-listed and headquartered firm. It remains to be seen how welcoming the US will be to collaborations like this, which could stand accused of letting Chinese firms into an expensively subsidised domestic battery materials supply chain by the back door.

Domestic challengers

Given the complexities of the graphite supply chain, vertical integration will be a crucial challenge for companies wanting to play in a re-established domestic market. US minerals firm Westwater Resources and Canadian mining company Nouveau Monde Graphite (NMG) are among those trying to solve the equation.

“Westwater Resources is committed to changing this imbalance by providing a domestic supply of natural graphite and a domestic source of graphite processing for the EV market,” the company said after news of the restrictions broke.

Westwater is currently building its Kellyton graphite processing plant in Alabama, which will supply processed graphite to the EV market beginning in early 2025, as well as later vertically integrating mining at its planned Coosa graphite project — also in Alabama — which is scheduled to begin mining natural graphite by the end of 2028.

NMG this week appointed construction heavyweight Pomerleau as construction manager for its upcoming Matawinie mine and Becancour battery material plant, both in Quebec. NMG will mine crystalline flake graphite and process it for LFP batteries.

“Our operations are 100pc located in Canada and developed to supply Western battery and EV producers. NMG is forecasted to become North America’s largest natural graphite producer, fully integrated, from ore to anode material,” says the firm.

Legislative help

Experts say that additional legislative support could further benefit the buildout of a domestic value chain. “I think it would be good to have additional support measures for domestic supply chains of stuff that we currently really rely on China for. The two best examples, I think, are graphite and anodes,” says Tom Moerenhout, associate professor at Columbia University's School of International and Public Affairs.

In Moerenhout’s view, there may need to be some at least short-term acceptance of a certain level of Chinese involvement, given its current dominance in the area. “A lot of people are saying there will need to be some type of carve-out in IRA regulations for this specific component. I think that would be pragmatic,” he says.

“Does that mean at the same time you cannot incentivise domestic graphite and anode production? Of course not.”

After the Biden administration announced a cooperation scheme with Australia to build out a graphite value chain, there are signs that there may be bipartisan appetite for more support.  “Australian companies Syrah and Novonix are delivering jobs and graphite in the US with support from the US government, “ the White House says.

Federal interest in graphite investments is also seen in the Department of Defence’s $37.5mn agreement — using funds appropriated via the IRA — to develop an advanced graphite supply chain around Graphite One’s Alaska mining project. The agreement includes plans to build a graphite ore processing facility in Washington state.

Albeit this graphite deal is not aimed at producing EV batteries, but it shows that there is momentum towards federal support for an emerging domestic graphite industry.

Shares in Western graphite companies have risen since China announced the restrictions, including NMG up by 10.5pc, Westwater up by 11.7pc, and Canadian firm Northern Graphite up by 14pc in the last five days.

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